Israel: Economic growth eases in the fourth quarter of 2025
GDP reading: Israel’s GDP grew 4.0% in seasonally adjusted quarter-on-quarter annualized (SAAR) terms in Q4, following 12.7% growth in the previous quarter. The slowdown was expected given Q3’s reading was boosted by the economy reopening following June’s Iran-Israel conflict. The economy grew 3.0% in 2025 as a whole, the best reading since 2022—before the war with Hamas broke out.
Drivers: Relative to the previous quarter’s data, readings in Q4 worsened for private consumption (-3.6% on a seasonally adjusted quarter-on-quarter annualized (SAAR) basis vs +22.2% in Q3), government consumption (+1.7% vs +3.9% in Q3), fixed investment (-6.4% vs +33.6% in Q3) and imports of goods and services (-2.0% vs +12.7% in Q3). In contrast, the reading for exports of goods and services improved in Q4 (+33.2% vs +20.1% in Q3).
In annual terms, the economy grew 3.7% in Q4, following a 3.6% expansion in the prior quarter.
Panelist insight: On the outlook, Goldman Sachs analysts said:
“We expect the unwinding of supply constraints to lead to a period of above-potential growth in Israel, leaving GDP on a growth path between the pre- and post-7 October 2023 trends. Today’s upside surprise relative to our forecast mechanically boosts our 2026 growth forecast further, and now we expect +5.7% growth, while our 2027 growth forecast remains unchanged at +4.7% growth.”